Governor fires back at private sector over excise tax hikes

Gov. Togiola Tulafono used his radio program to fire back at the private sector over their opposition to the administration’s proposal to hike excise tax on beer, alcohol and tobacco as one of the funding sources for the $10 million appropriation for the LBJ Medical Center off island medical referral program.

He describes comments by the private sector about laying off workers if higher excise taxes are imposed as “threats”, saying that businesses should be paying their fair share for medical care in American Samoa.

The governor was responding to a male caller, who said that hikes in excise taxes to fund the referral program will affect workers in this industry, because workers will be laid off. The caller acknowledged that the government is looking for ways to fund health care needs, but said the governor should also look at the side of the workers.

The caller said any layoffs or reduction in workforce would cause serious financial problems with their families.

Togiola responded that he appreciated the complaint, but explained that when the hike in excise tax under current law was first proposed a couple of years ago, this was the same position by this same industry (beer, alcohol and tobacco) contending that it will affect operations with a drop in sales and this means workforce will be scaled back.

“It never happened,” the governor alleged and accused the private sector of using this threat of workforce reduction due to drop in sales as their argument presented to their workers and the general public.

He said businesses involved in this beer, alcohol and tobacco industry are only thinking about their sales and profits, but not the health impact these imports have on the community. He said these goods are the reason there are high costs for health and medical care at the hospital and this is true not only in America Samoa but other states and territories.

And because of the products they sell to the community, the governor says these types of businesses should have a big share in the cost of health care. Otherwise, they will continue to do this type of business, he said.

As to any job losses, he said the government would like to know if the businesses are truthful in their statements about a drop in sales because of the hike in excise taxes, and a resulting reduction of workforce.

Togiola said no matter the hike in excise taxes — resulting in the increase in the retail price — there will still be people buying beer, alcohol and tobacco products. For example, he said the last hike in cigarette tax didn’t reduce the sales of cigarettes.

He did acknowledge that a problem currently faced by the government is that cigarettes are being smuggled into the territory to avoid paying the high excise tax, and this is something that the government is still working to address. (See front page story in today’s edition)

Don’t let threats by the businesses stop what needs to be done, said Togiola, adding that without a hospital there is no facility to care for the community. He insisted that the business community should pay their share in medical services provided by the hospital.

According to the governor, there may be a drop in sales of alcohol, tobacco and beer at the beginning — when the tax hike goes into effect — but it won’t last long and this has been proven in the past.

To justify the excise tax hike, Togiola said that if there are no increases on these products — which have caused a lot of health problems for local residents — then it’s the individual person who will end up paying the higher hospital fees.

He said the hospital needs money to operate and survive and that the money comes from the taxpayers who use the hospital.

The governor said if there is no remedy from the Fono, then he might as well tell the hospital to go ahead and proceed with the facility fee hikes, such as the $50 to see the doctor and $50 for prescriptions.

(Togiola did not mention the subsidy the government is suppose to pay LBJ in a timely manner, which was ‘delinquent’ in FY 2011, as being part of the LBJ funding deficit problem.)

He reminded everyone that when the hospital implemented the fee hikes in February this year, clinics were empty and people didn’t go to the hospital because they could not afford the fees.

Togiola didn’t identify by name members of the private sector who are opposed to the proposed excise tax hikes, but representatives of the Chamber of Commerce, G.H.C. Reid and Company and Panamex Pacific all testified last week in the House against the proposed hikes.

The appropriation for the off-island medical referral program goes through third and final reading today in the House where it’s expected to be approved, before the bill is sent to the Senate for review and consideration.

The House had already amended the bill by reducing the excise tax and eliminating the proposed additional 4% wage tax. It also reduced business license fees and amended the corporate franchise tax proposal to be based on the corporation's annual gross sales receipts and revenue.

The Senate rejected last week Tuesday its version of the bill, with a majority of senators arguing that the hikes, as proposed in the initial language of the bill, were too high.

It’s unclear how senators will react to the amended House version of the bill. The Senate reconvenes tomorrow following a three-day recess and the only issue they will take up is this $10 million appropriation bill.

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